India, US sign agreement for exchanging CbC reports; how it will reduce compliance for companies
The chairman of the CBDT in India and the US Ambassador to India signed the intergovernmental agreement (IGA) for exchanging country by country (CbC) reports as prescribed under the transfer pricing guidance on documentation of the OECD’s Base Erosion Profit Shift (BEPS) Action Plan 13, between the two countries. It will be effective for the years commencing on or after 1 January 2016. This is a major step in the direction of resolving some of the issues identified by the OECD/ G20 initiative on BEPS. Under the BEPS Action Plan 13, CbC reporting by Multinational Enterprises (MNEs) has been prescribed. In the CbC report, the MNEs would provide annually to the tax administration of the parent jurisdiction, a host of information pertaining to each tax jurisdiction in which they have subsidiaries or branches, the revenue, profit before tax, tax paid, total employees, capital, tangible assets et al in the form of a ‘master file’. It would include information pertaining to all the Constituent Entities (CE) in different jurisdictions, high level global information regarding their global business operations and transfer pricing policies that would be available to all the relevant jurisdictions’ tax administrations. The more detailed transactional transfer pricing documentation is required to be provided in a ‘local file’ in each country.
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